Binance founder Zhao Changpeng provides a deep analysis of five major topics in the Web 3.0 industry at the "Hong Kong Encryption Financial Forum."

These insights are of great reference value for understanding the development trends and investment opportunities in the encryption financial industry. Article organized by: Lesley Source: MetaEra On August 27, at the "Hong Kong Encryption Financial Forum", Zhao Changpeng, the founder of the world's largest digital asset trading platform Binance, presented his forward-looking thoughts on the future development of the industry.

Zhao Changpeng (CZ) focused the discussion on five themes: the evolution of stablecoins and the strategic position of the US dollar, the regulation and liquidity bottlenecks of RWA, the potential of decentralized exchanges, the new investment direction provided by the encryption asset treasury ( DAT ) model for traditional investors, and the transformational changes in trading patterns brought about by the integration of AI and Web 3.0. Zhao Changpeng (CZ)'s viewpoint not only reflects his profound insight into the current development of the industry but also showcases his strategic thinking about the future landscape of digital finance. These insights hold significant reference value for understanding the development trends and investment opportunities in the encryption financial industry. The following text is organized based on the live viewpoints of Zhao Changpeng (CZ), and the author has tried to maintain CZ's original expressions as much as possible. Zhao Changpeng (CZ) Talks Stablecoins: From Volatility "Safe Haven" to Globalization Tool of the US Dollar In fact, I am not an expert in the stablecoin field, but the Binance platform carries about 70% of the global stablecoin trading volume, which makes us the most important stablecoin distribution channel in the industry. Let me briefly introduce the development history of stablecoins. The earliest stablecoin technology prototype was "Colored Coins", which was the first "asset on-chain" solution explored by the Bitcoin community. In 2014, USDT was initiated by Brock Pierce, and the project initially developed slowly. Subsequently, Pierce gradually withdrew, making way for the current USDT team led by Craig Sellars and others, and there was still not much progress by 2017. When Binance was established in 2017, we focused on cryptocurrency trading, supporting trading pairs like Bitcoin to Ethereum, BNB, and others, but we lacked fiat trading functionality. This created a user experience issue: whenever the price of Bitcoin dropped, users could only withdraw Bitcoin to other fiat exchanges to exchange for fiat, and there was a significant uncertainty about whether these funds would flow back to our platform. At the same time, this is also extremely unfriendly to the user experience. To improve the user experience, we decided to support USDT as a "safe haven" during market downturns. At that time, we understood stablecoins as a short-term storage tool, so the decision to support USDT was relatively simple—there were no complex cooperation agreements signed, nor was it a strategic partnership; it was simply an integration of this product. At this time, USDT ushered in its rapid development period: First, after 2017, cryptocurrency exchanges entered a rapid development period, with many platforms including Binance starting to support USDT, which propelled the rapid growth of USDT. Subsequently, USDT welcomed a second wave of growth momentum: many Asian users have a demand for US dollars, but there are difficulties in directly opening dollar accounts, and USDT provides them with an alternative solution. Tether's profitability has always been outstanding, and due to facing regulatory pressure from the United States and difficulties in banking cooperation, they have remained relatively low-key. In 2019, the U.S. regulatory agency Paxos proactively reached out to us, proposing a collaboration to issue a stablecoin, which led to the creation of BUSD. From 2019 to 2023, the market capitalization of BUSD grew to $23 billion, during which time our resource投入 was not significant; we mainly engaged in some brand support and promotional activities, such as the "free withdrawal" campaign. In 2023, the U.S. government phased out the BUSD project. If BUSD had continued, it would have seen a substantial growth scale, as its growth rate at that time surpassed that of USDT and USDC. It is worth noting that when the BUSD project was shut down, all user funds were fully refunded, which fully demonstrates the qualities of BUSD as a compliant, transparent, and secure project. Stablecoins and exchanges have become one of the core profit segments in the field of encryption finance. Their business model is highly simplified: after obtaining a compliance license, users deposit funds, and the platform can issue tokens; when users redeem tokens, the platform provides cash exchange. This model has low entry barriers, high liquidity, and huge market potential, with significant long-term profitability.

From a national strategic perspective, the attitude of the U.S. government towards stablecoins has undergone a significant shift in recent years. This current U.S. administration is very savvy, leveraging its commercial background to deeply understand the strategic value of Tether to the global status of the U.S. dollar. Currently, more than 100 billion USDT has been used to purchase U.S. Treasury bonds, and Tether is widely used globally. The key point is that Americans themselves do not need stablecoins—they can directly use the bank ACH system for dollar transactions. Almost all USDT users are outside the U.S., which effectively expands the global influence of the U.S. dollar. This aligns very well with China's idea of expanding the influence of the renminbi internationally. Stablecoins are essentially tools that help underlying currencies achieve globalization, which should be highly attractive to various countries. Of course, as freely circulating blockchain assets, stablecoins do pose challenges to foreign exchange controls, but these issues can also be resolved. Currently, the more than a dozen countries I have been in contact with have shown strong interest in developing local stablecoins, and everyone hopes that their fiat currencies can go on-chain. When the United States passed the GENIUS Act in July, it proposed policy directions to limit the development of central bank digital currencies (CBDC), reflecting a profound strategic layout regarding the global dominance of the US dollar. Stablecoins are widely popular due to their high liquidity and good user experience, while some government-issued digital currencies may face stricter regulations and monitoring, which could affect market acceptance. In fact, since 2014, more than 20 countries have attempted to issue CBDCs, but none have truly achieved success at the market level. Blockchain technology is essentially a ledger technology, and its first application scenario is finance, so stablecoins are a natural application of blockchain technology. Currently, we only see that US dollar stablecoins have developed relatively maturely, while stablecoins of other national currencies have yet to emerge, which means that the growth space in this track is extremely large in the future. Now, every country wants to develop stablecoin businesses. I believe that every country should at least have a few stablecoin products. Zhao Changpeng (CZ) talks about RWA: the triple challenges of liquidity, regulation, and mechanisms. Despite the broad market prospects of RWA (Real World Asset Tokenization) sector, its implementation difficulty is much higher than market expectations. The specific challenges can be summarized in the following three aspects:

1. Liquidity Dilemma From a practical perspective, products with strong financial attributes are relatively easier to tokenize, primarily because traditional financial products inherently possess high trading attributes, and their digital representation is relatively mature. In contrast, the tokenization of non-financial assets faces fundamental obstacles. Although theoretically one can "Tokenize Everything"—all cities, buildings, and individuals can issue tokens—in practice, there are numerous challenges. Taking real estate as an example, even in the volatile Hong Kong property market, the fluctuations are still much smaller compared to Bitcoin. After issuing coins for such assets with low volatility, the trading activity is weak due to the low volatility, leading to insufficient order book depth. At this point, liquidity decreases, and investors will not place many orders, creating a vicious cycle: if the order book is too shallow, the trading volume will decrease. If investors attempt to enter or exit with hundreds of millions in capital, it is almost impossible to execute trades; even if the asset is on-chain, liquidity remains insufficient, making it more prone to unexpected fluctuations and even short-term manipulation.
2. Regulatory Complexity Products with financial attributes often involve a core question - is it a security? Is it a security, a commodity, or something else? In major countries or financially developed nations, there are clear definitions and different regulatory bodies; in some smaller countries, there may be just one regulatory body overseeing everything. If multiple regulatory departments are involved, compliance terms can become quite complex. Companies need to apply for different licenses: futures licenses, spot licenses, digital currency licenses, bank custody licenses, and so on. When a company obtains many licenses, its business model may become more restricted, and often, one business may not be able to operate at all.
3. Product mechanism defects In my opinion, the tokenization of securities in the United States is currently not valid at the product level. The stock tokenization products we see now, such as xStocks, do not have their token prices linked to the actual stock prices, which is unreasonable. Theoretically, if there is a price difference between the two, investors could profit through arbitrage. But the reality is that this price difference has always existed - this indicates that the mechanism of the product itself is not functioning. In other words, in the current stock tokenization sector, there is no real link between the tokens and the stocks, so the whole model is still not valid at the product level. Although the United States is trying various tokenization methods, a truly viable solution has not yet been found.

Despite these challenges, there is still a truly operational RWA model at present - stablecoins. The underlying assets of stablecoins are mainly traditional financial instruments such as U.S. Treasury bonds, and the success of this model has validated the feasibility of tokenizing financial assets. The US dollar has been brought on-chain through stablecoins. In the current blockchain ecosystem, almost all assets are priced in US dollars, while the euro and renminbi are largely absent in this space. As the largest stock market in the world, the United States attracts global investors to buy US stocks through blockchain technology, which is extremely beneficial for its economic development. If US stocks can also be successfully brought on-chain, it will further consolidate the US's dominant position in the global financial market. From a rational perspective, the United States should actively support this developmental direction; other countries that do not participate in this reform may also face the risk of being marginalized. For example, the Hong Kong Stock Exchange, as an important exchange with global influence, may gradually lose its influence if it is absent from this round of reform. Other Asian exchanges, such as the Shanghai Stock Exchange, also face the same strategic choice. Economically speaking, this is something that should be done 100%, and not doing it will lead to being eliminated. Just as China's e-commerce market could be completely dominated by Amazon if there were no Alibaba, the absence in the fintech field will similarly have far-reaching economic impacts. Despite the challenges on the regulatory front, this trend has an extremely far-reaching impact on the economy, and countries should seriously consider relevant arrangements. With the wisdom and innovative capabilities of Asians, these issues will ultimately be resolved, and one of the keys lies in seizing the right moment. For businesses and entrepreneurs, it is essential to accurately grasp the timing during the market window period: entering too early may face survival pressure, while entering too late may miss the opportunity. We are currently in a rare golden window period. The U.S. policy has shown unprecedented support for virtual currencies, which will inevitably drive other countries looking to develop their economies to take corresponding actions. Hong Kong, as a long-standing financial center in Asia, along with the supportive attitude of the Hong Kong government, presents a historical opportunity that is quite rare. Therefore, everyone should fully seize this strategic opportunity. Exchange Transformation: Decentralization Will Surely Surpass Centralization, How Can Hong Kong Seize the Opportunity? The essence and future vision of exchanges I believe that exchanges should not impose limits on tradable assets, and all assets should be able to circulate freely on the same platform. All assets are just a Token after being on-chain, whether they are encryption native assets or real-world assets (RWA), there is no substantial difference from the technical perspective of exchanges. Adding a new asset class usually does not require complex development, as long as it is supported on the existing chain. Currently, most RWA projects do not require an independent blockchain, and are more about issuing tokens based on public chains like Ethereum, BNB, or Solana, so the support difficulty at the wallet and exchange level is very low. The real difference lies in compliance: which regulatory agency you need to apply for a license from and whether you can get approval. Once the license issue is resolved, there are almost no technical barriers. In the long run, future exchanges should achieve unified trading of various global assets, whether it is a building, the future IP rights of a celebrity, or even an individual's net worth, all of which can circulate in the same market. This not only maximizes liquidity but also makes the price discovery mechanism more efficient. Of course, RWA also has some unique challenges. For example, when you tokenize a building, if you later want to sell that building, you may only be able to sell a part of it. Because once the tokens are issued, if there are investors holding just one Unit of the asset and refuse to sell, you will not be able to fully repurchase the entire building or incur huge costs. This can be understood as the concept of "on-chain stubborn residents." Although the realization of "global asset on-chain" still requires time, it is not out of reach for 90% of the countries worldwide. Compared to some large countries with extremely complex regulatory systems, many countries are more likely to directly adopt unified international standards, thereby taking the lead in promoting global asset on-chain and free circulation. Thoughts on the Path to Developing a World-Class Exchange in Hong Kong When it comes to how Hong Kong can build a world-class exchange, I can analyze it from a logical perspective. Many countries or regions, in the early stages of regulation in the encryption industry, often choose strict controls to reduce risks and ensure safety. Regulatory authorities are concerned about making mistakes, so they usually require all operations to be conducted locally: local licenses, local offices, local employees, local compliance departments, local servers, local data storage, local matching engines, local user bases, and completely independent local wallet infrastructure from abroad. This idea is relatively easy to implement in the traditional physical world, such as controlling through safes and physical isolation. However, in the digital currency industry, this distinction is not very significant. Regardless of whether the servers are located in Hong Kong, Singapore, or the United States, the likelihood of being attacked by hackers is the same, because everything operates online. More importantly, if you want to split operations, building a secure wallet infrastructure often requires an investment of around one billion dollars. Moreover, the problem is not just about funding, but also about the shortage of talent – it is very difficult to repeatedly recruit hundreds of top global security experts to set up this foundational system. The cost of replicating a complete system is, in fact, equivalent to the cost of establishing a first-class international exchange. From a liquidity perspective, if only local residents are allowed to trade, taking Hong Kong as an example with a population of 8 million, or other small countries with an active user base of 200,000 to 300,000, it would be impossible to generate sufficient trading volume. Without liquidity, price fluctuations will be very severe, which is actually harmful to users. Real user protection comes from a sufficiently deep order pool—when there are hundreds of millions in large orders, prices will not be broken, and when futures prices fluctuate, forced liquidation is not necessary due to ample market liquidity. Purchasing 10 bitcoins on an exchange with lower liquidity will result in significant price slippage, and users will also have to bear higher costs. Therefore, large global exchanges can provide the most basic user protection—reducing users' trading costs. As countries attempt to establish independent systems, it is bound to lead to complex management challenges, which are not feasible from a business perspective. At the same time, many countries impose restrictions on tradable assets; for example, Hong Kong currently has many restrictions on listed cryptocurrencies, resulting in a limited range of products. From what I understand, most licensed exchanges in Hong Kong are currently operating at a loss, and although they can sustain this in the short term, this loss-making model is difficult to maintain in the long run. However, Hong Kong also has its advantages - the pace of improvement in Hong Kong is very fast. We saw Hong Kong launch a new stablecoin draft in May, even earlier than the United States. The government is very proactive in communicating with industry participants, including dialogues with professionals like us. Hong Kong may have been relatively conservative in previous years, which is completely understandable, but with the changes in the global situation, Hong Kong is now behaving very proactively. I believe now is a great starting point. The limitations of the past do not mean that the future will always be restricted; rather, now is an excellent time to explore opportunities. This is exactly why many Web 3.0 practitioners, including myself, choose to explore opportunities in Hong Kong. Future trends of decentralized exchanges I believe that decentralized exchanges will definitely be larger than centralized exchanges in the future. Although Binance may be quite large at the moment, I do not think it will maintain the largest position forever. Decentralized exchanges currently have no KYC requirements, making it very convenient and quick for users who know how to use wallets, and it offers a high level of transparency—although sometimes it is too transparent, as everyone can see other people's orders. From a regulatory perspective, we have paid a significant price for not doing a good job on KYC at centralized exchanges. However, currently the U.S. seems to have little regulatory measures for DeFi, which may bring regulatory dividends to DeFi. But due to historical reasons, I personally find it hard to try this area again. From a user experience perspective, the user experience of decentralized exchanges is quite good, but users need to understand how to use wallets. In fact, those who have used centralized exchanges in the past are aware that the user experience is not ideal. The interface is filled with addresses, contracts, and other numbers as well as "garbled text," and the operation process often requires frequent checking of block explorers, while also needing to guard against various details such as MEV attacks. During my own learning process, I have also encountered attacks multiple times. Therefore, for users who have just transitioned from Web 2.0 to Web 3.0, most will still choose centralized exchanges, as the login method using email and password, along with customer support, makes them feel more comfortable. However, over time, as some users become familiar with wallets, they may turn to decentralized exchanges. Currently, the fees for decentralized exchanges are actually higher than those for centralized exchanges, but in the long run, with technological advancements, the costs of decentralized exchanges should become cheaper. Many decentralized exchanges now have their own token incentive mechanisms, using the issuance of tokens for incentives. However, this incentive will eventually disappear, as unlimited token issuance is not feasible—unlimited issuance will lead to a decline in the price of existing tokens. Therefore, the current market is still in a relatively early stage, and there are still these token incentives. However, in the long term, I believe that in 5 to 10 years, decentralized exchanges will become very large. I think that in 10 to 20 years, the scale of decentralized exchanges will definitely surpass that of centralized exchanges; this is the trend of the future. Although I will no longer lead relevant projects, from an investment perspective, we have invested in many similar projects, but only small shares, and we are now providing support from behind. I believe that the future development space in this field is still quite large. Zhao Changpeng (CZ) discusses the encryption asset treasury strategy ( DAT ): a bridge for traditional investors to enter the encryption world. Many people often oversimplify the concept of DAT (encryption asset treasury strategy), but in fact, this sector is highly diversified. Ultimately, its core logic is to package digital currencies in a stock-like manner, allowing traditional stock investors to easily participate in investments. The DAT field has various levels and forms, just like traditional companies, where different models can coexist. Encryption ETFs are primarily issued in the United States, but many investors lack U.S. stock accounts or are unwilling to bear their high trading and management costs. In contrast, listed companies like Strategy can often achieve asset allocation at a lower cost by directly holding digital currencies. At the same time, their financing methods are more diverse, allowing them to raise funds in various markets such as the United States, Hong Kong, and Japan. The differences in financing channels and investor structures among listed companies in different regions also shape their unique market patterns.

In the publicly listed company model, DAT Company mainly has the following operational modes:

1. Passive single asset holding model Represented by Strategy, it focuses on passive holding of a single asset, Bitcoin. This model is relatively simple, with low management costs and decision-making costs, allowing for adherence to the established strategy regardless of Bitcoin price fluctuations.
2. Proactive Single Asset Trading Model Although only one type of coin is held, the management strategies are completely different. These companies will try to judge the rise and fall to engage in active trading, which requires an assessment of the manager's trading ability. Because this involves subjective judgment factors, the results of this model can be positive or negative.
3. Multi-Asset Portfolio Management Model The more complex DAT company holds a variety of different digital currencies. Managers need to make complex decisions: how much Bitcoin to hold, how much BNB, how much Ethereum, etc. The frequency of portfolio adjustments and the timing of those adjustments will test the manager's capabilities.
4. Ecological Investment Construction Model This is the most complex model, where in addition to holding coins, 10%, 20%, or more of the funds will be used to invest in ecosystem development. For example, a company focused on Ethereum may want to help the development of the entire Ethereum ecosystem through investment, making this model more interesting. Projects like BNB that support other digital asset ecosystems also have similar practices, but this places higher demands on management capabilities. Therefore, DAT is not just about "holding coins"; different models correspond to different management costs and management requirements. The DAT companies we currently support tend to lean towards the simplest first form. We prefer companies that focus solely on a single asset, especially BNB, as it is easier to judge and does not require excessive involvement in daily management. In a bull market, listed companies generally benefit, but in a bear market, especially in the United States, companies often face the risk of lawsuits. If the strategy is clear and simple enough, the risk of lawsuits will relatively decrease, and the company's legal costs can also be reduced accordingly - after all, litigation is extremely expensive. Our goal is to minimize operating costs while promoting the concept of long-term holding. We do not want the company to use funds for additional investments, but rather hope that they can participate more deeply in supporting the development of the ecosystem. The important significance of the DAT model lies in the fact that many companies' finance departments, listed companies, and even state-owned enterprises (SOEs) and central enterprises cannot directly buy digital currencies. However, through the DAT model, we can actually allow these traditional investors to gain exposure to digital currencies. This group is actually a very large market, much larger than the cryptocurrency circle. In the DAT projects we participate in, we usually only play the role of small supporters. Most of the funding for these projects comes from traditional stock markets or other channels, which greatly helps our ecological development and pulls many groups outside the cryptocurrency space to purchase digital currencies. We generally do not take the lead or manage these companies, but rather seek suitable managers through our ecosystem and connections. Management of publicly listed companies is not our expertise, but there are many individuals in the industry with relevant experience, and we prefer to collaborate with them to leverage synergies. The Integration of AI and Web 3.0: The Necessary Path from Concept to Reality Frankly speaking, the combination of AI and Web 3.0 is still not ideal at the moment. However, I believe this trend is by no means just a concept hype, but rather a trend that will inevitably lead to breakthrough developments in the future. A few months ago, I posed a question: What currency will AI use? The answer is obviously not the US dollar or traditional payment systems, as AI cannot complete KYC. The currency system of AI will inevitably be based on digital currency and blockchain, and payments can be completed through API calls or Broadcasting Transaction. This means that the transaction volume of blockchain will experience exponential growth. In the future, everyone may have hundreds or thousands of AI agents completing tasks such as video production, multilingual translation, content distribution, booking, and message replies in the background. Their frequent interactions will give rise to massive micro-payments, with the volume of encryption financial transactions conservatively estimated to increase by thousands of times. For example, a blogger can set the first 1/3 of an article to be free, charging only 0.1 yuan for each reading of the remaining 2/3. If hundreds of thousands pay, he can earn tens of thousands of yuan — this model cannot be realized under the traditional financial system, but can be easily supported through the combination of AI and Web 3.0. Transactions will also become more global. I can simultaneously hire engineers and designers from China, India, and even around the world, and AI will automatically handle settlements and payments. However, most of the so-called "AI agents" in the current Web 3.0 space are still stuck in the Memecoin-style pseudo-product stage: the front-end showcases some novel content, while the back-end calls mature large model APIs like ChatGPT, lacking real utility. What we truly need are AI tools that can accomplish real work and create economic value, and top large model companies are also working hard to explore this direction. However, the development of AI requires an extremely large amount of funding. The competition for computing power in large models is exceptionally fierce, with astonishing costs. It is reported that OpenAI currently possesses about 1-2 PB of computing power, with an annual cost of about 6.5 billion dollars per PB, and its expansion plan is to scale up by 10 to 100 times—resulting in astronomical figures, not including chip expenses. No VC, company, or even country can bear such a massive financial burden alone, which is why the AI industry has begun to explore new financing paths through the lens of Web 3.0. Fundamentally, AI should be viewed as a public good. Currently, many large models are too closed. Allowing token holders to share profits to make models more open-source, decentralized, and accessible to everyone may be a more reasonable direction for development. I have also discussed this matter with several founders of top large models. Although everything is still in its early stages, this trend is bound to come. Although the integration of AI and Web 3.0 is not yet perfected, its future development prospects are still highly anticipated.